Answered: Before Pronghorn Corporation engages in…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Before Pronghorn Corporation engages in the following treasury stock transactions, its general ledger reflects, among others, the following account balances (par value of its stock is $30 per share).

Paid-in Capital in Excess of Par—Common Stock		Common Stock		Retained Earnings
$107,700		$244,800		$75,400

Record the treasury stock transactions (given below) under the cost method of handling treasury stock; use the FIFO method for purchase-sale purposes.

(a)		Bought 370 shares of treasury stock at $40 per share.
(b)		Bought 310 shares of treasury stock at $44 per share.
(c)		Sold 330 shares of treasury stock at $42 per share.
(d)		Sold 100 shares of treasury stock at $38 per share.

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Answer

Sno	Account Titles and Explanation	Debit	Credit
A	Treasury Stock (370 shares X $ 40 per share)	$ 14,800
	Cash		$ 14,800
	(To record purchase of Treasury Stock)

B	Treasury Stock (310 shares X $ 44 per share)	$ 13,640
	Cash		$ 13,640
	(To record purchase of Treasury Stock)

C	Cash (330 shares X $ 42 per share)	$ 13,860
	Treasury Stock (330 shares X $ 40 per share)		$ 13,200
	Additional Paid in Capital (330 shares X $ 2 per share)		$ 660
	(To record reissue of Treasury Stock)

D	Cash (100 shares X $ 38 per share)	$ 3,800
	Additional Paid in Capital (Working Note)	$ 320
	Treasury Stock (Working Note)		$ 4,120
	(To record reissue of Treasury Stock)

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